SCMT 3623 Advanced Inventory
If, in a newsvendor context, the cost of overstocking is greater than the cost of understocking, which of the following will be true?
.The firm should strive to achieve an in-stock rate of less than 50%.
If the cost of overstocking is equal to the cost of understocking and average demand is 220 units with a standard deviation of 80 units, the optimal newsvendor quantity will be equal to
220 units.
For a given product, the order quantity is 600 units, average annual demand is 12,000 units, the average lead time is 1 month, and the safety stock is 400 units. What is the average inventory level for this product?
700 units
refers to more distant future time periods.
A long-term forecast is a forecast that
A negative seasonal index in a particular season
A negative seasonal index in a particular season
For a given product, the optimal order quantity is 500 units, average lead time demand is 250 units, and the optimal safety stock is 300 units. Which of the following statements are NOT correct?
All of the statements listed here are incorrect.
If the order quantity is 100 units and the reorder point is 300 units, then which of the following is true?
An order of 100 units will be placed every time the inventory position drops to 300 units.
In distribution requirements planning (DRP), ending inventories equal which of the following?
Ending inventory of the prior period + planned receipts forecast/usage
If a firm reduces the number of warehouses from two to one and finds that total safety stock levels have not decreased as a result of this warehouse centralization, the most likely explanation is that lead time demands between the two warehouses were perfectly negatively correlated.
FALSE
The greater the average lead time, the greater the optimal newsvendor quantity.
FALSE
Distribution requirements planning helps managers to better forecast consumer demand.
False
The managerial R,Q model is called managerial because it *should* be used by real managers.
False
The mean absolute deviation is a measure of bias in forecasts
False
Customer Demand
In a logistics context, forecasting is concerned with predicting future
In a periodic review system
In a periodic review system
adjustments of statistical forecasts based on executives knowledge of future events.
In the context of forecasting, executive judgment refers to
mean absolute percentage error.
MAPE stands for
Which of the following does the basic EOQ model help inventory managers accomplish?
Minimize the sum of inventory holding and order placement costs
In a given scenario, the EOQ is 60 and the associated total cost is G(Q)=$4,200. What will be the total cost if an order quantity of 40 (rather than the EOQ) is used?
More than $4,200
An increase in inventory holding costs per unit, all else equal, will result in which of the following?
None of the answers listed are correct.
In a newsvendor context, the cost of understocking per unit might include
None of the answers listed are correct.
In inventory management, the primary measure of risk is
None of the answers listed are correct.
In the context of forecasting, the term bias refers to
None of the answers listed are correct.
In a newsvendor context, the cost of overstocking per unit can be computed as follows:
Purchase cost + disposal cost salvage value
The Grass Roots Approach
Qualitative forecasting methods include
A company sells two products which both have the same lead time characteristics (in terms of mean and standard deviation). Demand for product A is 80 units, on average, with a standard deviation of 18. Demand for product B is 75 units, on average, with a standard deviation of 16. Based on this information, we can conclude that the degree of uncertainty (in terms of the standard deviation of lead time demand) must be greater for product A than product B.
TRUE
If lead time demands at two stocking locations are uncorrelated, the pooled standard deviation of lead time demand will be equal to the square root of the sum of the lead time demand variances of locations 1 and 2.
TRUE
When the exponential smoothing method is used to forecast future demand, a higher value of the weighting factor alpha means that greater weights are placed on more recent demand observations (as opposed to more distant past demand observations).
TRUE
For a given newsvendor product, the unit purchase cost is $2 and the unit sales price is $4. Any unsold units are sold at a deeply discounted price of $1. Which of the following statements will be true?
The cost of understocking per unit is $2.
A company uses a managerial reorder point (R,Q) model. Let the order quantity, safety stocks and average lead time demand for a given product be equal to 500 units each. Based on the information given, which of these statements is correct?
The reorder point is equal to 1,000 units.
actual demand in period t-1.
The use of the last period demand forecasting technique implies that the forecast for period t is equal to
Which of the following will result if a firm orders a given product in quantities lower than the EOQ?
Total logistics costs will be higher than in the optimum.
Which of the following is a possible reason for variations in lead times?
Trucks can break down or get stuck in traffic.
there is a positive forecast error.
When actual demand is greater than the forecast, we conclude that
Time series forecasting
When forecasts are determined based on past demand observations, we speak of
In the context of forecasting, the mean error is
a measure of bias in forecasts.
Holt-Winter s forecasting method
calculates forecasts as the sum of base level, trend, and seasonal components.
In a managerial reorder point model, the greater the given customer service level target, the
greater the reorder point.
The exponential smoothing forecasting technique
is also called the exponentially weighted moving average forecasting technique.
Compared to forecasting methods such as simple exponential smoothing, one benefit of the exponentially weighted moving average with trend and seasonality is that
it can forecast demand for more than one time period into the future.
The fundamental (potential) benefit of risk pooling is that
lead time and/or demand variability can be reduced.
Order splitting (as a risk pooling method) potentially results in lower
lead time uncertainty.
The objective of the R,Q model is to minimize the sum of
order placement, holding, and stockout costs.
replenished when the order quantity (Q) is smaller than the reorder point (R).
reviewed continuously.
The larger the mean absolute deviation,
the less accurate the forecasts.
In a given forecasting exercise, the sum of all seasonal indexes should be equal to
the number of distinct seasons.
In logistics, the portfolio effect refers to
the potential reduction in safety stock requirements achieved through risk pooling.